Commercial Tenants: Renegotiating a Commercial Lease
As a commercial tenant, you are entitled to renegotiate your commercial lease. Your landlord is not obliged to agree to your proposed terms, but given the current market conditions, they may be willing to come to a new arrangement.
Commercial leases and Covid-19
With most people working from home in recent months, commercial premises have become somewhat redundant. Yet this has not alleviated commercial tenants of their responsibilities. Most are still locked into a legal contract – making their commercial lease an expensive and unwanted overhead.
Having said that, the Coronavirus Act 2020 has afforded commercial tenants some protection. Most notably, they cannot be forced from their premises (known as ‘forfeiture’) if they are unable to pay their rent. But this does not waive a tenant’s liabilities – the payments will simply accrue with interest, should the tenant fall into arrears.
Some commercial tenants may hope to rely on the legal principles of force majeure and the law of frustration. However, very few commercial leases contain a force majeure clause, which allows the parties to terminate a contract. Also, there are no reported cases in England in which a lease has been frustrated by Covid-19.
This creates something of a bleak picture for commercial tenants who are struggling financially. Of course, it is always worth checking the terms of your commercial lease, just in case there is an exit strategy. That aside, there is one option available to you – and that is to negotiate.
Renegotiating a commercial lease
You perfectly entitled to negotiate the terms of your lease. Your landlord does not have to comply with your requests. But given the global crisis, landlords may be willing to compromise, rather than run the risk of an empty property. Given the threat of a huge recession, the market may be slow for years to come, making it all the more difficult to fill a commercial space.
The terms of your proposal will be unique to you and your business. You could ask to:
- Pay rent on a month-to-month basis, rather than on a quarterly basis
- Have a rent reduction or a rent holiday
- Link rental payments to your business turnover
- Ease tenant repair obligations
- Add, remove or amend break clauses
- Remove keep-open clauses
- Assign or sub-let part of the lease
- Reduce service charges, if common parts have been closed
Record the new arrangement
If a commercial landlord does agree to amend the lease, the new arrangement must be properly recorded. Otherwise, a tenant may be accused of breaching the terms of the contract. Temporary measures can be set out in a side letter, whereas permanent changes may require a deed of variation on the original lease.
A solicitor who specialises in commercial leases can ensure the new terms are clearly set out, protecting a commercial tenant – and their business – for the months ahead.
Commercial property solicitors Sunderland
If you are a commercial tenant hoping to renegotiate the terms of your commercial lease, please contact us at Mark Cook Solicitors. We can negotiate with your commercial landlord on your behalf, advising of any pitfalls that you may not have considered. We can then draw up a new lease, incorporating the agreed changes.
To find out more, please call us on 0191 567 7244 and we’ll be happy to help you. If you would rather contact us online, email us at email@example.com and one of our team will be in contact with you shortly.